PS and PET producers face tough market conditions

PS and PET producers face tough market conditions

Several resin analysts speaking at a conference last week said that PS and PET market factors point to rough roads ahead. The event was sponsored by Canadian Plastics.

Jeremy Rakes, the PS analysts for Platts, noted that the North American PS market is now fully consolidated and vertically integrated, as it includes just four producers (Total, Styrolution, NOVA and Americas Styrenics). Demand for PS has fallen by about one-fifth in the past decade, with 2004 output being the highest and 2010 production being the lowest during the period.

North American sales are hurt because this is the high-cost region. Benzene prices in the U.S. and Canada are at their highest level and will remain high in the future (styrene is made from benzene and ethylene). "North American PS is among the high cost supply in the world," said Rakes. This is for both general-purpose PS and for high-impact PS.

With weak North American PS demand, future sales growth will be driven by developing countries. However, sales will be restricted due to the current high cost of PS, which is leading plastic product makers to look to other resins. In addition, the new surge of lightweight fracking gas being used by petrochemical crackers is leading to a restriction in benzene output, thus putting yet more upward price pressure on PS production.

Ron Coifman, a market analysts at ICIS, outlined a similarly dismal picture for PET. Global PET production capacity, at about 28 million metric tons per year, is far greater than demand (20 million metric tons). This oversupply is also occurring in North America, which accounts for about 19 percent of global demand. Capacity exceeds demand by about 800,000 pounds annually in North America. Even though global demand will continue to rise at about 6.8 percent through 2017, says Coifman, huge new plants are expected to come on line, including M&G’s 1 million metric ton per year facility in Corpus Christi, Texas, and Indorama’s expansion of its Decatur, Alabama plant by 400,000 pounds per year.